Establishing a natural resource tax unit in the Liberian Revenue Authority

Project:
Establishing a natural resource tax unit in the Liberian Revenue Authority
Location:
West Africa
Establishing the Natural Resources Tax Unit in the Revenue Authority and building capacity for more efficient administration of revenues

76.9% of Liberia’s GDP comes from the agricultural sector, and its industry is largely dependent on production of natural resources, such as rubber, palm oil, timber and diamond mining. As of 2012, however, the majority of the government’s tax revenues have come from import duties and maritime registries, leaving the natural resources sector at the mercy of corruption and smuggling.

Effective government revenue management has become a significant issue in large resource-rich and developing countries. It is important for these countries in the fight against poverty to develop fair revenue decentralisation in order to increase government efficiency by moving tasks away from an overburdened central office. To achieve this, they must have a robust administrative and human capacity system, and this is where Adam Smith International was able to offer their expertise. The improvement of the Revenue Department’s administration capacity in Liberia will help ensure healthier governance based upon better transparency and anti-tax evasion measures to effectively manage revenues from natural resources.

In 2013, Adam Smith International, with funding from the Australian government, supported the Liberian Ministry of Finance to establish and build the capacity of a Natural Resources Tax Unit in the revenue department. The Unit has been set up as part of the Large Tax Division and provides auditors with specific expertise to assist in the review of natural resource companies to promote the best way of managing natural wealth and so prevent the exploitation of workers and revenues in the sector. We then assisted the Unit in a range of areas, such as improving the understanding of production sharing contracts, mineral development agreements, their interaction with the Liberia Revenue Code, and knowledge about mining and oil in regard to geological, scientific and technical issues, helping Liberia reap the benefits of the favourable world prices of the goods it exports.